Numerous top growth stocks rallied briskly following quarterly results in the stock market today, but Peloton Interactive sold off and is testing a key technical level. The January jobs report showed the economy is still recovering at a very slow pace.
On Leaderboard, at least six members rallied 1% or more. Leaderboard delivered a 58% gain in 2020 on a portfolio-weighted basis, compared with a 16.3% rise by the S&P 500, excluding dividends.
A full position on Leaderboard commands roughly 10% of a portfolio dedicated to growth stocks. A half position would take 5%, a quarter position 2.5%.
U.S. nonfarm payrolls grew 49,000 last month, just missing the Econoday forecast by 1,000 jobs. The jobless rate fell to 6.3% from 6.7% in December. However, the drop in jobs in December got revised sharply lower to 227,000 from an initial report for a 140,000-position decrease.
At around 1130 a.m. ET, the Dow Jones Industrial Average defended a slim 0.2% gain as the blue chip index’s medical, financial and consumer-oriented components led the upside.
Crude oil continued its solid rebound in January; West Texas Intermediate futures gained another 1.1% to $56.86 a barrel. The yield on the benchmark U.S. Treasury 10-year bond is holding steady at 1.15%, up from 0.93% at the start of 2021.
Leading The Dow Jones Today
Johnson & Johnson (JNJ), which is expected to launch its single-dose coronavirus vaccine in the near future, joined eight other Dow Jones industrial components in rising 1 point or more.
J&J recently cleared a nearly four-month saucer-style base at 155.57 and has risen as much as 11.5% past the proper buy point. Thus, J&J is extended past the 5% buy zone for now.
The FDA has scheduled a review of J&J’s vaccine candidate on Feb. 26.
The S&P 500 edged up 0.3%. The Nasdaq composite bounced within a tight intraday range, yet moved nearly 0.2% higher. Small caps led; iShares Russell 2000 (IWM) rallied almost 1% and aimed at a fifth straight advance.
The market recently shifted positively back into a confirmed uptrend.
Please read the Tuesday Big Picture story for more detail.
Stock Market Leaders Amid A Confirmed Uptrend
Activision Blizzard (ATVI) gapped up 10% and was showcased by CAN SLIM experts on Friday’s IBD Live show.
The video game giant posted solid Q4 results (earnings per share up 23%, sales up 22%). The stock broke out of a long saucer-like pattern at 87.83 on Dec. 16 and is now sharply extended.
Ubiquiti (UI) also jumped at the open and romped nearly 11% higher.
At 348, the stock has advanced more than 78% past a buy point of 195.10 in a cup-like base that formed from August to October. The specialist in wide-area internet gear recently offered a secondary entry point during a rebound off the 10-week moving average near 260 during the week ended Jan. 22.
Before the market open, the large cap posted an 81% leap in fourth-quarter earnings to $2.53 a share as sales rose 56% to $479.4 million. Ubiquiti marked a second straight quarter of top-line acceleration.
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As seen in IBD Stock Checkup, Ubiquiti boasts a 99 Composite Rating on a scale of 1 (the pits) to 99 (like platinum). The Composite Rating is not a buy signal. Use the rating to quickly form a watchlist of stocks with the best fundamental, technical and fund ownership quality traits.
On the downside, Peloton (PTON) is losing all of its gains for the week with a more than 7% drop. Volume was running heavy in the first hour of trading. The 50-day moving average is 9.4 million shares per day. The interactive fitness gear maker reported a third straight quarter of solid earnings at 18 cents per share vs. a net loss of 20 cents a year earlier as sales cycled 128% higher to $1.06 billion. That marked Peloton’s first billion-dollar quarter.
Peloton is making big investments in expanding its manufacturing capacity and warned spending could hit the bottom line in the near term.
Despite Friday’s losses, the stock continues to find important support at the 10-week moving average.
A big drop through this key support-and-resistance level and failure to rebound quickly would constitute a defensive signal to take profits.
Another Stock Market Leader Sells Off
Unity Software (U) holders are facing such a decision.
The platform for software development in augmented reality reported a 39% rise in Q4 sales to $220.3 million, a quarterly best. But it bled red ink again, losing 31 cents a share vs. a net loss of 19 cents a year earlier. Unity’s sales outlook evidently disappointed the Street.
Shares in Unity are down nearly 12% for the week and trading deep beneath the 10-week line. Clearly a new base is forming, so those who hold a big profit cushion could consider holding it through the current correction. But solid gains should not be allowed to turn into a total loss.
The San Francisco-based company went public at $52 a share in September.
The Innovator IBD 50 (FFTY) ETF rose for a fourth session in five days, up nearly 1% on Friday.
FFTY, at the early morning high of 46.49, holds a 13.2% gain since Jan. 1. The exchange traded fund rose 18.2% in 2020.
Please follow Chung on Twitter: @saitochung and @IBD_DChung
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